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August 18, 2014
Rethinking Loyalty Marketing
 
Customer loyalty, like love, can be fickle and fleeting. Every brand craves it. But few really achieve it. It’s time to rethink the ways brands woo their best customers.
 
Building and sustaining loyalty is part stimulus-and-response, part value exchange, and part emotional experience. The quality of the relationship rather than the number of transactions is the barometer for loyalty. The dynamic mix of rational and irrational elements must be considered in the context of macro factors, like a recession, or micro factors, like an awful in-store experience.
 
Even though the average household belongs to eighteen programs and actively participates in seven of them, consumers are ambivalent about loyalty programs. They like what they like on their own terms. Enthusiasms wax and wane. They want to hear from brands — but not that often. They are governed by a WiiFM (what’s in it for me) mentality, even for brands that are near and dear to their hearts. And even long-standing loyalty can be derailed by aggressive price offers.
 
Digital, social, and mobile channels create new and creative opportunities for brands to communicate and interact with loyal and potentially loyal consumers. This, in turn, empowers fans to interact, respond, and share. Everyone has the potential to be either an evangelical advocate or a poisonous critic.
 
Points-based systems, pioneered by the airlines, expanded by credit cards, car rental firms, and grocery chains and cheapened by all, have limited and shrinking appeal. Too often, the experience of trying to redeem points or miles is so frustrating, infuriating, or just plain unfair that it destroys the rationale for collecting them. On the other hand, a free trip, automatically applied coupons or discounts that yield free groceries, or a first-class upgrade can be sublime.
 
Eight loyalty marketing building blocks are:
 
Present a Human Face. Consumers have a hard time relating to nameless and faceless corporate brands. Use your people to interact with customers. Don’t ignore the power of inbound telemarketing or live chat to handle service issues and merchandize services or pre-sell products. Many brands offer concierge-like services to make this person-to-person connection. Others call into customer segments to solicit feedback, conduct surveys, or gauge customer satisfaction. All these human touches matter.
 
Prompt Interaction. Consumers who frequently interact with brands are generally more loyal. In many categories, consumers interacting digitally use more services, buy more products, and tend to become brand advocates sooner. In the early stage of a relationship, create multiple opportunities to interact. But don’t constantly sell. Brands should orient consumers to a conversational tone and cadence of give-and-take, which invests prospects and buyers in the issues that are central to the brand.

Ideally, best customers should feel an ownership stake in the brand. Ask questions, take surveys, test consumers’ knowledge, solicit feedback, set preferences, prompt social media posts, and encourage voting. Build the expectation and the muscle memory for a continuous conversation between the brand and its community.
 
Don’t Discount Values. There is a strong link between personal and brand values. Consumers don’t just buy a brand; they buy into what a brand stands for. Many participants say their favorite brand’s values are “the same as mine.” People who align themselves with a brand’s values are more satisfied with loyalty programs.
 
Craft Relevant, Explicit Messages. Consumers expect personalized information and rewards. Consumers understand the implicit quid pro quo even if brands don’t always explain them clearly. Everybody wants to know the rules, what they have to do to earn and redeem, and generally why they should remain active.
 
Personalized Offers. Cardholders want offers based on preferences that they manage. They want rewards earned and applied to the stuff they care about most. They want incentives and reminders based on their behavior. Consumers expect brands to know them and to provide rewards and offers at appropriate inflection points. These inflection points can be planned and communicated in an easy-to-understand way (e.g. 5% cash back) or spontaneously, which can surprise or delight customers at the point of sale. If you are not proactively taking care of your best customers, all the cards, points, and promises don’t matter.
 
Rethink Tiers. Everybody has or wants status. The trick is to create differentiated services, offers, and rewards that people perceive as valuable enough to strive for. Being (or becoming) a platinum member no longer has much badge value. To motivate tier progression, customers want to know what goodies or extras they get for reaching each level. Most can calculate the value of benefits compared to their spending or action level in their heads. Too often, the payoff isn’t worth the effort.
 
Use Multiple Channels. Almost all loyalty program participants want branded communication. Almost half want it in at least three channels. Apps and mobile use of loyalty points is becoming increasingly important. Loyalists want communication on their terms. They want to redeem easily and quickly from any device.
 
Finesse Privacy Concerns. Many loyalty program participants think brands require or acquire too much information. There’s a built-in paradox. If program satisfaction is a function of relevance and data collection drives relevance; without data you are doomed.
 
If you don’t collect and use the data, you risk developing programs and content that nobody cares about. Explain what you will do with the data and incent data exchange. If consumers think it’s worth it, a majority of Americans still trade personal information for relevant offers.
 
In a plugged-in, on-the-go, ADD society, loyalty is a constantly shifting bogey. Yet with insights, approaches, and these eight tactics, brands can capitalize on the longing for connection, recognition, reward, and love in each person. 

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Danny Flamberg, EVP Managing Director of Digital Strategy and CRM at Publicis based in New York, has been building brands and building businesses for more than 30 years.Prior to joining Publicis, he led a successful global consulting group called Booster Rocket, as Managing Partner. Before becoming a consultant, he was Vice President of Global Marketing at SAP, SVP and Managing Director at Digitas in New York and Europe and President of Relationship Marketing at Amiratti Puris Lintas and Lowe Worldwide.
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